While it is probably unrealistic to completely ban social media use in the workplace, companies can take effective steps to manage the risk.

The explosion of social media is taking many businesses by surprise. Some are edging cautiously into viral marketing, finding clever ways to leverage YouTube, Facebook, LinkedIn and other sharing Websites to their advantage. Others are turning a blind eye to uses that may put their companies at substantial risk. High on the list of concerns should be the potential for employee postings and blogs that could:

• Expose the company to legal liability, including claims of defamation, harassment and privacy violations

• Leak proprietary information or trade secrets that may decrease a firm’s ability to be successful in a competitive market

• Damage the reputation of the company through false, disparaging or reckless communications.

While it is probably unrealistic to completely ban social media use in the workplace—and, in fact, such a ban may keep enterprises from benefiting from the upside potential of these pervasive, instantaneous communication tools—companies can take effective steps to manage the risk.

While “friending” dozens of people on a personal Website and keeping up with the latest online videos used to be a preoccupation for teens, today nearly half of the adult population actively uses social media, according to a Travelers Global Technology national survey.

Although the survey indicated that most social media use takes place outside of work, nearly one in every five people access such sites while on the job. In addition, about one in eight people who responded to the survey said they post work-related information on social media Websites. And roughly two-thirds of the respondents said their company does not have a policy regarding social media usage—or that they are not aware of one if it does exist.

Several lawsuits demonstrate why workplace usage of social media and the lack of company policies are issues. In one case, an employee posted a negative opinion about a prior employer on a Website during a lunch break, using a company-owned computer. Even though the posting was not within the scope of the employee’s duties and violated the company’s policy about personal use of company resources, the employer was still forced to defend itself against allegations of defamation.

In another case, a health care facility was sued after an employee recognized someone who was receiving treatment, checked the patient’s chart and then posted something online about that person’s diagnosis, treatment and marital infidelity. Other actions include libel suits over blogs, school suspensions over fake MySpace pages and subpoenas to force identification of anonymous posters.